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Will Security Token Offerings (STO) take over crypto market in 2019?

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Security Token Offerings

Will Security Token Offerings (STOs) eclipse ICOs success?

Panic, panic, panic.

A single word that dictated the state of Crypto affairs in 2018.

 

Market crash graphThe market has dropped to 100 Billion mark. Most people are calling it quits and declaring Crypto dead. For many projects, that proclamation of death is true. They may not survive this liquidity crisis. For those that whether this bear winter, SEC may greet them on the other side with hefty fines, or worse.

One of the reasons SEC is going after projects that raised money using ICOs is because of the securities laws. Instead of trying to circumvent these laws – what if the crypto market embraces the securities laws?

That is the thought behind Security Token Offerings (STOs).

Most businesses are staying away from raising money using ICO model, in spite of it being easy and inexpensive, because of the headaches from Securities board. However, if you find a way to be compliant with regulatory requirements and issue securities using the ICO model, it will bring a lot of legitimate businesses and investors to this space.

Difference between the traditional stock market and Security Tokens

The existing capital market is very restrictive.

You have to be a millionaire or a venture capitalist to get on the ground floor of an exciting opportunity. The common man has no shot at getting in on the action during early stages.  Raising capital through traditional capital markets is very expensive. PwC’s report indicates that the costs can easily run into millions.

Below table summarizes big differences between traditional capital market and security tokens.

Difference between Security Token Offerings (STOs) and the traditional capital market

STO

Capital Market

Micro-investments possibleRestricted to Accredited Investors and Venture Capitalists
Very inexpensive to offer Security TokensCosts could run into millions
Online management of Investor communication and share registry possibleMaintaining ownership records is pretty outdated and expensive
Automated dividends distribution is possibleSophisticated third-party vendors required to manage dividends distribution
Numerous customization options based on the needPretty restrictive
Open to worldwide markets

Geography restrictions apply

Security Token Offerings are a perfect intersection of Cryptos and traditional stock markets

crypto and traditional stock marketsExisting methods of raising capital are very restrictive as to who can access it and what they can offer. However, security markets have gone through a lot of trials and errors and hard lessons to build investor protection protocols.

Cryptos were made accessible to everyone irrespective of economic stature, however, when investors got scammed, there was no good recourse to recover the funds.

Security Tokens have the potential to be accessible to everyone, help tokenize anything of value while addressing the investor protection concerns by adhering to the Securities laws.

STOs will bring legitimacy to the crypto space
Security Token Offerings and their legitimacy

Right now, people who have invested in ICOs have no claim of ownership. They are purely speculating on the ‘hope’ of increase in demand and value of the tokens they bought in.

Security tokens will be different, in that, they will offer ownership rights in the company, power to vote, participate in decisions of the company, receive dividends and sell their shares to someone else who will then have similar rights.

Bragging rights of ICOs for raising billions of dollars will look like a joke once STOs go full throttle. Some industry experts expect STOs to be a multi-trillion-dollar industry. Dan Tapscott, the author of Blockchain Revolution, sayslikely to explode in value, are security tokens, Cryptoassets that represent financial assets, such as stocks, bonds, and future contracts.



Big guys are creating platforms to enable STO exchanges

tZero and Coinbase are building platforms that will enable STO exchange. This will bring the credibility and access that is needed for the Security Tokens to become mainstream.

Security Token Offerings exchangesCompanies like Fidelity that manage investments in the Trillions will hesitate to put any money through existing crypto exchanges, however, if an enterprise-grade solution is offered by tZero or Coinbase – they will definitely look into them. Remember, Fidelity and other investment institutions have to offer new investment vehicles on their platforms since Millennials are shying away from stocks and traditional investments.

It is imperative for these giants to welcome new investment class to continue to be relevant in a decade or two from now. Getting reliable platforms to this space will help the old timers make the leap.

STOs just might make up for what Cryptos lacked

What lacked in crypto space was a mainstream platform that looked, felt and operated the way securities and traditional trading platforms did.

understanding crypto and stosPeople have a hard time understanding how something that is created by a computer code could have any value. And how someone can assign a value to something that is not backed up by an asset or ownership rights.

That is where Security Tokens are going to be different.

They are going to offer ownership, voting, asset allocation, or other rights (all or few or selected, however it is designed) to the investors. Now investors will have the incentive to buy a security token. The advantage to the companies is that they will have access to capital from micro investors as well – they don’t have to impress someone from Wall Street or Venture Capital firm, they just have to impress a common joe that wants to put in his/her spare change into an idea.

Projects are lining up to cater STO market

Polymath promised a lot to this space, we are yet to see anything concrete from them.  WeOwn has already built an app that is ready to use including their share registry. At the time of this writing, PrefLogic is working its way around securities laws to become a legitimate STO platform in the United States market.

While tZero, Coinbase and eventually NASDAQ may provide a place to trade security tokens on their platforms, the projects mentioned above are the ones that are going to act as a bridge between investors and ideas.

What can we expect in 2019 and forward?

Security Token Offerings market in 2019

During the first half of 2019, we will see companies like tZero and Coinbase offer platforms that will enable trading Security Tokens. These Security Token platforms will not only cater to new STOs but also existing crypto projects that will be forced to adhere to securities laws.

Once Bitcoin smart contracts are enabled using RSK protocol, we might even see STOs launched on Bitcoin blockchain.

There will be a transition of sorts in the second half of 2019 where more and more big brand names will seek STOs to raise capital. Once mainstream businesses realize how inexpensive and easy it is to raise capital using STO platforms – they will start flocking to this platform eventually, probably not in 2019. This will just be the beginning. Once this model becomes mainstream – we will witness trade volumes move from Millions to Billions into Trillions in the space. And most of that money will be made up of spare change from common folks.

Thank you for reading this article.

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IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

CryptoTapas does not endorse or guarantee the accuracy of the information and claims made in respective publications referenced in this database.

About the author

RK Reddy holds two Masters degrees, one in Accounting and another in Business Administration with over 15 years of experience in the financial services industry.

RK Reddy is an ardent fan of Blockchain and Cryptocurrencies. You can see the excitement about this new technology in every article on Cryptotapas.com. Sometimes this excitement leads to an overly optimistic view. Guilty as charged. RK Reddy says what may seem like an ‘overly optimistic expectation’ today may become an everyday norm in 5-10 years; look at the history of cars or airplanes, Blockchain and Cryptocurrencies belong to a similar frame of reference.”  Of course, that is just his opinion.


CryptoSpace

Why this bull run has no precedence? ONE key metric to rule them all

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bull run 2020

Everyone is singing the praises for the bulls’ arrival in the crypto space.

Some say that 2020 will mark the biggest bull run in cryptos’, albeit short, history.  

We are already in October so we doubt any fireworks will take place now since there is a lot of uncertainty about the US elections.

Add the uncertainty around the stimulus bills, unemployment trends, soon to be lifted forbearances and the list goes on.

2020 still has another 2.5 months to go but most of these uncertainties will take a while to show their true impact.

For instance, what will a Biden presidency mean for the economy and cryptos?  

How many people will be forced to sell their homes once the forbearance’s are lifted?

What happens if the next stimulus bill does not pass through?

When will the vaccine become available?

These are some of the unique situations that we have no precedence for. Do not let anyone convince you that we know what’s going to unfold, because no one does.

Yes, everyone has theories, like the ones we are presenting here, but that is all they are: theories.

The BIGGEST metric that crypto community is not considering

We are no economists nor can we run any fancy charts to impress a point on you.  

We are just good observers and have common sense to deduce a few things based on data.  

For instance, between 2007 and 2010 consumer spending dropped by an overall .2% and we know what that meant for the economy.

Personal consumption expenditure

In 2020, people have literally cut down on their spending.  Some of it is forced due to the restrictions imposed by external forces and most of it is self imposed.

I am sure the spending on marijuana, liquor and food have gone up but what about other spending?

2020 also saw a spike in the savings balances.  

Economy is not stimulated by people hoarding their money. People need to exchange value for the economy to thrive.

What happens to the spending behaviors when the true stats around evictions, lost jobs (that are not coming back) and small businesses that are shutting down permanently are out?

Our guess is that people are going to be weary of spending money in the short to medium term. If we were forced to pick a timeline – we would say about 12-16 months (assuming we get a vaccine in Q1 2021).

When is the next bull run? 

Based on what we have seen in 2007 through 2010 and observing the consumer spending habits in recent times, we think that Bitcoin (and cryptos) will not find their true peak until next halving.

We know this is not what you came to hear.  

If the bull run in your mind is hitting the 2017 highs then we do not think you have to wait until the next bull run.

If the bull run means a $100,000 bitcoin then we stand by our opinion on when that is going to be.

A case for bull run

In spite of what is going on in the street, following factors are acting as strong bull market signals for the crypto space. 

Hype: Crypto space (specifically Bitcoin) has been gathering a lot of steam in terms of brand awareness and mass penetration.  This is great for the long game.

Adoption: More than ever, private and public enterprises are becoming serious about bitcoin and underlying blockchain technology.  What is good for bitcoin is good for blockchain and vice-versa.  MicroStrategy investment, Paul Tudor Jones getting involved with bitcoin are some examples.

Tech explosion: Crypto space is home to some of the brilliant minds in the tech space. Add Big Techs interest in the crypto space and you have a perfect recipe for monumental shifts in crypto perception. Tech giants like Microsoft, Google, Twitter, Facebook are all getting involved with blockchain and cryptocurrencies in some shape or form.

Retail demand: More and more retail investors are looking for alternative investments and they are waiting on the sidelines to get involved with Bitcoin.  As soon as companies like Fidelity or other brands offer crypto investment through retirement plans – there would be a massive influx into this space.

DeFi: DeFi in its current state might be infested with shittty projects but as a concept and technological shift to turn the current banking system upside down – it holds great potential. Any demand to DeFi brings more demand to bitcoin, ethereum and blockchain in general.

Conclusion

The debate around when is the next bull run will hinge on how the market recovers from this pandemic. How soon will we get the vaccine and how many of the lost small businesses and jobs are we going to resurrect?

From a macro perspective, Bitcoin and few select cryptocurrencies will continue their upward trajectory so if you looked back to 2020 five years from now, you might think bitcoin was on sale.  

Question is: how many people have that kind of patience?

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

 

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CryptoSpace

Is Cryptocurrency driven by fundamentals or hype?

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Fundamentals or Hype

During the early 2000s India experienced a massive real estate bubble. With a lot of western companies opening their outsourcing centers in India, the land prices shot up 2x, 5x, 10x, and even 100x.

You read that right. 

Have you heard about 100x in Real Estate?

To be sure, the demand was exponentially growing in the major cities like Bangalore, Hyderabad, etc., which were quickly turning into back offices for the many western companies.

The hype in these cities was somewhat justified.

However, here is the kicker.  Many remote places which did not directly benefit from this influx of foreign direct investment started seeing their prices go up in similar fashion.

In a crazy case of trickle effect and super-hype created by the real estate agents, properties were just trading from one party to another for unbelievable markups and the prices constantly went up.

Today, that massive bubble is still intact minus the crazy multipliers.

The reason we like the comparison of what happened in Indian Real Estate market to the crypto is that a genuine need in a specific space has been exploited to translate that hype onto anything tagged with the name. 

In India that hype tag was ‘land’ and in crypto that hype tag could mean anything from ICOs to DeFi.

Ask any crypto enthusiast they will make you believe that crypto is all about fundamentals.  However, anyone who has spent even a few months in the space quickly realizes that crypto prices don’t follow fundamentals.  

This is one place where Crypto space shares its similarities with the stock market as well.

Stock market is completely distanced from the economy and it too acts irrationally, that is, when people are losing jobs and businesses are shutting down permanently, the stock market rallies higher and higher.

Similarly, crypto space, to its own detriment, is ignoring the projects that have amazing fundamentals while pumping other projects solely based on the hype.

Long term vs. Short term

Hype is short lived. Fundamentals are a long game.

That is why we emphasize that anyone interested in the crypto space does their own research in finding the projects that meet their fundamental criteria.

Once you know that a project has fundamentals (team that can execute, problem worth solving, solution that can solve, market demand, etc.,) then you just ignore the FOMO and FUD.

This will help you sleep better and use your spare time and energy in quality endeavors like taking care of yourself or spending time with family, etc.,

If you get on the hype train – it will be difficult to catch the right wave and this constant lookout for the next big thing is going to rob you of all the peace.

And, if you find yourself on the right side of the wave – you will be decimated and drowned.

DeFi defies all common sense

That is what happened with a lot of people who tried to ‘time’ the DeFi market.  

Don’t get us wrong. Many people made a ton of money (and good for them).  However, remember, crypto at this point of its evolution is a zero sum game.  That means, for everyone who made a million someone lost that million.

Unless you got on a project quite early keeping your risk level low or you have some insider information (not to mention this being illegal), you can generally not ‘time’ the market.

Many veteran traders have lost their shirts in chasing the market.

Conclusion: does this mean I should stay away from DeFi?

We cannot tell you that.  That is something you got to decide for yourself.

By market cap, Yearn Finance is considered one of the top DeFi projects. It lost over 67% in less than a month.   

Personally, if the top most project is still trying to find the ground while other projects are losing 99% of their value in a matter of a day, that means one thing:  the space needs time to mature.

We will continue to learn about DeFi. We will continue to invest what we can afford to lose when we find the right project that meets our fundamentals criteria.

That is our strategy at the moment. You have to find a strategy that suits you.

While crypto space is riding on the hype at the moment, we continue to believe in fundamentals.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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CryptoSpace

Will India Ban Cryptocurrency Trading?

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Cryptocurrrency Ban India

India keeps playing with the emotions of the crypto community in India with constant back and forth of change in rules.

First it was a complete ban of crypto transactions. RBI forbids banks from serving any clients that deal in cryptocurrencies. Thanks to the Supreme court decision, RBI had to back off.

Now, there is a renewed effort to place a ban on crypto again.  

Is Crypto Ban a good thing for India’s financial future?

No, Cryptocurrency is here to stay according to many financial investors and billionaires. As nations prepare for a hyper-inflation cycle to sweep the world, Cryptocurrency can act as a hedge in addition to gold and silver.

If the government is concerned about illegal activities with cryptos then they can relax because most crimes happen in fiat cash transactions, not crypto which is traceable.

Crypto traders generally are not the ones that take part in illicit trades.  It is those who introduce illegal ICOs and OTC trades.

How about regulations?

Instead of banning crypto trades, how about bringing clear regulations to provide a framework for the crypto trading.

Such a framework should include stricter guidelines for ICOs and OTC trades.  

Crypto exchanges can relay the trading information directly to the tax authorities (instead of needing to be subpoenaed) so that there is transparency.

Will India Ban Cryptocurrency Trading?

That depends on whether India wants to be in the ranks of the United States, Switzerland, South Korea, etc., or if it wants to be counted among China, Russia and North Korea.

The United States, South Korea and Switzerland (along with other countries) are doing everything to stay ahead in the blockchain and crypto race.

Other countries we stated above are working to stomp on the innovation. 

A better question is: Can India ban cryptocurrency trading?  

The answer is NO.  

To ban cryptocurrency trading – India will have to shut down the internet.  

In the event of an actual law that bans Indians from participating in the cryptocurrency trading, the only people that will be impacted by those are the ‘honest’ citizens because the crooked ones will still find ways to trade using VPN or alias names.

For a country that wants to be at the forefront of technological revolution a ban would be a very backward decision.

We urge the Indian government to NOT punish the honest citizens by introducing a ban.  Rather, introduce a sensible legal framework for everyone to operate in.

This will bring more businesses to India and take India’s platforms to the world.

Thank you for reading and sharing this article. We appreciate you.

Stay safe and healthy!

Top 5 Cryptocurrencies 2020

IMPORTANT DISCLAIMER

Everything in this article is an opinion, not an advice of any kind. This material has been prepared for general informational purposes only and it is not intended to be relied upon as accounting, tax, investment, legal or other professional advice. Please consult with a professional for specific advice.

We do not endorse or guarantee the accuracy of the information and claims made.

All product and company names are trademarks™ or registered® trademarks of their respective holders. Use of them does not imply any affiliation with or endorsement by them.

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